Gold retained sharp overnight gains on Wednesday, bolstered along with other safe-haven assets as risk-aversion in the market sent equities tumbling.
Asian shares fell as a nascent recovery in crude prices lost momentum after Saudi Arabia’s oil minister effectively ruled out production cuts by major producers anytime soon.
The yen gained against key peers such as the dollar and euro.
Spot gold was steady at $1,227.40 an ounce by 0300 GMT, after gaining 1.4 per cent in the previous session.
“Bullion’s ability to hold above $1,200 is impressive. The longer it does so, the stronger a base it will build,’’ said HSBC analyst James Steel.
“As long as gold-ETF demand holds up, we believe the gold rally can be sustained.’’
Investors have been channelling money into bullion, as shown by flows into exchange-traded funds. Assets in SPDR Gold Trust, the top gold-backed ETF, are at their highest since March 2015.
The fund’s inflows since the beginning of the year have already surpassed outflows for the whole of 2015. The inflows so far have been able to offset the lack of interest from key Asian buyers, who have taken advantage of the gold rally to sell bullion and take profits.
Discounts in India are at a record of about $50 an ounce to the global benchmark, while in China they are at about $1.
Gold has gained 16 per cent so far this year, making it one of the best performing assets of the year, on the back of concerns over the global economy and the sell-off in stocks.
Technically, gold looks set to test recent highs at $1,240 and then a one-year top of $1,260, MKS Group trader Jason Cerisola said.
Fed rate hike
The metal has also been helped by speculation that the Federal Reserve may not raise US interest rates this year, after the first rate hike in nearly a decade in December.
Signs of a slowdown in the global economy and volatile financial markets have led investors to bet against rate hikes any time soon.
Prices for US fed funds futures suggest investors see little chance of any increases this year. The Fed may need to keep US interest rates unchanged for an “extended period’’ to give inflation time to rise back to the central bank’s 2-per cent target, Dallas Fed chief Robert Kaplan had said on Tuesday.
However, Kansas City Fed President Esther George said the US central bank should consider raising nterest rates at its next policy meeting in March.